Why Your Car Dropping In Value Does Not Make Your Insurance Cheaper

The costs associated with repairing a vehicle have a much larger effect on your monthly vehicle insurance premiums than depreciation, according to Budget Insurance.

“Many people assume that the biggest risk to their vehicle is theft or a complete write-off in an accident – and that the actual value of their vehicle is the major determinant of the insurance premium price,” said Tyrone Lowther, head of Budget Insurance.

“This is not the case.”

According to Budget, a relatively low percentage of accident-damaged vehicles are written off and an estimated 90% of vehicles involved in accidents are repaired and put back on the road.

Repairing damages to modern vehicles is a costly exercise, with motorists having to pay much more this year to fix their vehicles than at the same time last year, despite their vehicles depreciating by as much as 15%

Modern vehicles have plenty of technologies that drive up the cost of repair significantly, such as integrated headlight units, bumpers and fenders with parking sensors, and airbags and sensors – to name a few.


Many new vehicles are imported, too, meaning spare parts must also be imported. This further increases costs in a pandemic-delayed global supply chain.

“Therefore, what may look like minor damage to the untrained eye can, and often does, cost tens of thousands of rands to repair,” said Lowther.

“In fact, most of the insurance premium goes towards covering the vehicle against accident damage and paying for damages caused to other person’s vehicles and property.”

Lowther said that while the market value of your car might decrease as time goes by, your insurance premium is providing cover against damage more than anything else.

This leads to your monthly vehicle insurance premium staying the same or even increasing, as your insurer must be able to “viably cover the risk”.

Lowther added that motorists must read through their insurance policies and schedules to gain a full understanding of what they are signing up for, and whether their insurer will provide premium benefits based on the depreciating value of their car.


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